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Bimetallism.

Coins of the
United
States.

The ratio.

The government may limit the amount of bullion that will be coined; this may be called limited coinage. Under free coinage of any metal the government makes no effort to control the amount of bullion which will be coined; it coins " on private account" all the bullion brought to its mint. Under limited coinage a certain amount of the bullion is coined 66

account."

on government

Since the first coinage act of our government (1792) there has been free coinage of gold. coinage of silver until 1873.

There was also free Because during this time

there was free coinage of both metals, and both gold and silver dollars were full legal tender, we had nominally, at least, bimetallism or a double standard. The law of 1873, by stopping the coinage of silver dollars, brought about the single gold standard.* After 1878 there was limited silver coinage until the purchase of silver bullion was discontinued in 1893.

Below is a list of the coins now made at the mints of the United States.

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The "standard" coins of each kind are of course the gold dollar and the silver dollar. The weight of the pure metal in the gold dollar is fixed by law at 23.22

is a more accurate definition: free coinage contemplates the coining of all the bullion brought to the mints, either gratuitously or with a deduction not to exceed the actual expenses of coinage.

*In reality the country had been on a gold basis for a number of years. The number of silver dollars coined between 1834 and 1873 was only 6,525,000.

grains (Troy weight). In a silver dollar, the pure metal weighs 371.25 grains, or 15.988+ times as much as in the gold dollar. Hence we say that the ratio of our standard coins is 15.988+ to 1, or approximately 16: 1. This is called the mint ratio. Since our coins are .9 fine, the total weights are 25.8 grains for the gold dollar and 412.5 grains for the silver dollar.

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Any one who has gold may take it to the mint and receive in exchange exactly the same amount of gold in gold coin. For the alloy which has been added he will pay a 'mint charge" of two cents per ounce. It is evident, therefore, that 23.22 grains of gold are worth exactly $1.00 at the mint; this fixes the price of gold everywhere and under all conditions.

With silver the case is different. In a silver dollar 371.25 grains of pure silver pass as $1.00, but their intrinsic value may be less. You may find in the daily papers, market quotations of the price of silver bars, as of wheat and other products. In April, 1901, silver was quoted at 60 cents an ounce; consequently, for a dollar one might buy 800 grains of silver on the market. Now since one can buy only 23.22 grains of gold for a dollar, the market ratio of gold and silver was 34.45+:1. A simple calculation will show that at this value the silver in a silver dollar was worth less than 46 cents. If now Market the government should purchase silver at the market price and coin it into dollars, there would be a profit of 53 cents for each dollar coined. This profit is called seigniorage, though this was not the original meaning of the term.

same.

Before 1873, when we had free coinage of both metals, the mint and market ratios were very nearly the Certain causes (some say the act of 1873 itself, others say the enormously increased production of silver) have brought about the decline in the value of

ratio.

silver. How great this decline has been is evident from the accompanying chart:

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The silver question.

Since the decline became noticeable there has been agitation in favor of resuming the free coinage of silver at the original ratio (16:1). It is this demand for “free silver" which furnishes the key to the history of our silver coinage since 1873 and to the discussions over money in recent political campaigns. This question is involved in the larger one of bimetallism-a deep and intricate economic problem upon both sides of which eminent authorities are arrayed. We cannot enter into this discussion, but an outline of recent silver legislation is necessary to the understanding of our present monetary system.

As already stated, in 1873 the silver dollar was dropped from the list of coins to be minted. Its legal tender quality was not altered until, by a law of 1874, this was limited to amounts of five dollars or less. In 1878 Congress passed the Bland act, directing the Law of 1878. Secretary of the Treasury to purchase from $2,000,000 to $4,000,000 worth of silver bullion each month. This was to be coined into silver dollars, which once more became full legal tender. The silver purchased under this act was coined into $378,000,000.

By the Sherman act of 1890 the Bland act was repealed; the Secretary of the Treasury was required to purchase four and one-half million ounces of silver bullion monthly (or so much thereof as might be offered) at the market price, but not to exceed $1.29 an ounce. This bullion was to be paid for by a new kind of paper money called Treasury notes of 1890. For one year two million ounces of this bullion were to be coined each month; after that time only enough was to be coined to redeem the Treasury notes as they might be returned to the Treasury. When redeemed in silver the Treasury notes are cancelled or destroyed. That clause of this act which required the purchase of silver was repealed by Congress in 1893 under circumstances to be described hereafter. Since that date no silver bullion has been purchased by the government, and since July 1, 1891, silver dollars have been coined only in small amounts to redeem Treasury notes.

Repeal of

purchase clause in

1893.

The silver coins of denominations less than one dollar are called subsidiary coins. The silver half-dollar weighs only 192 grains and is therefore lighter proportionately than the silver dollar. The quarter and ten cent piece are correspondingly reduced in weight. Subsidiary silver. They are legal tender only in sums of ten dollars or less. The five cent piece (nickel) weighs 77.16 grains and is composed of 75 per cent. copper and 25 per cent. nickel. The one cent piece

Minor coins.

United States notes.

weighs 48 grains and is composed of 95 per cent. copper and 5 per cent. tin and zinc. These minor coins are legal tender in amounts

of twenty-five cents or less.

II. PAPER MONEY.

There are at present five kinds of paper money in circulation. They are United States notes, silver certificates, gold certificates, Treasury notes of 1890, and National bank notes.* The United States notes were created in the early years of the Civil War as a means of paying the enormous expenses of the government. Taxation is the ordinary method of providing funds for government expenses; but it is difficult to create a new system of taxation and some time is required to put it into operation. In the year 1862 the government was without cash in its treasury. Efforts had been made to borrow money by the sale of bonds, but the bonds had depreciated in value. It was therefore determined that the government should print certain designs on pieces of paper, call these money, and compel people to accept them in payment of debts by declaring them legal tender. These were the United States notes, sometimes called "legal tenders." Three issues of $150,000,000 each were authorized by Congress on these dates: February 25, 1862, July 11, 1862, and March 3, 1863. With this money the government paid the salaries of its officers and soldiers and purchased supplies that were necessary for carrying on the Civil War.

Probably these issues were intended to be temporary, the government expecting to redeem the notes within a few years. It was in reality a method of forcing peo

* A sixth kind, currency certificates, are issued to National banks in exchange for United States notes deposited in the Treasury. Their denominations are not less than $5,000. The term "greenbacks" may be applied to any kind of paper money, though usually it means United States notes.

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